Climate change: role of banks and financial institutions in greening the banking system

Abstract

Global warming and climate change are hot topics of environmentalists globally. The World Bank’s ‘Climate Change Action Plan’ for 2021 to 2025 explains the policies and programs to be implemented by banks and financial institutions to combat climate change. The UN and World Bank have taken actions towards achieving minimal carbon emissions that in turn reduce global warming. In India, national-level financial institutions such as RBI, NABARD, SIDBI and Exim Bank took the lead in formulating policies to achieve the goal of greening the banking system. SBI granted financial assistance for windmills and kick-started green financing activity, followed by all other banks. Financial assistance at the concessional interest rate to renewable energy and energy-efficient projects and buildings, electric vehicles, start-ups, trading green bonds and issues of green mutual funds are introduced by various banks. Additionally, within the bank, a sea change in the form green ATMs, digitalization of banking, issue of electronic bank statements and e-mail communication are started. Various other changes, such as green bank building, purchasing electric equipment conforming to green standards, changing LED lighting systems, conducting conferences and meetings electronically, etc., are implemented in the banks. Thus, both the internal changes within the bank and external changes address the issue of climate change. The study reveals that even though banks have taken the green initiatives a decade back, it is not widely popularized among customers and common people for a nationwide speedy adoption of green banking.